We initiate coverage of Brazil sovereigns with a Neutral recommendation on USD-denominated bonds. We view Neutral as a positioned call rather than a split of the difference. It is the point where a strong external balance sheet caps the downside, while a deteriorating fiscal trajectory and tight-to-fair valuations cap the upside. We do not think the credit earns an Overweight. The belly already trades close to its own recent averages and only modestly wide of higher-rated regional peers, while the fiscal turn needed to drive broader compression is absent into an election cycle with limited visible reform delivery. We also do not favor an Underweight. Brazil has no market-access or liquidity problem, funds predominantly in local currency, and pays enough carry that a defensive stance is costly to hold against a downside the institutional framework makes gradual rather than abrupt.

The curve separates near-term repayment risk from fiscal-duration risk, and that separation drives our positioning more than final maturity. The 2027s and 2029s have largely priced Brazil’s external strength and now trade too tight to express more than a liquidity anchor, leaving little spread cushion and limited upside. The long end pays the most spread, but it also carries the part of the curve most exposed to the still-rising debt path and to an election cycle that has yet to offer a credible catalyst to bend it lower. Neither end is where we want the core of the position.

Read more

We maintain a Neutral view on Braskem’s senior unsecured complex following the 60-day court stay and rating downgrades. The stay reduces near term enforcement risk, but it does not restore working capital access, solve the maturity wall, or define the final creditor package. This is now a restructuring trade, not a conventional yield trade. Within the curve, we prefer the BRASKM 8.500% 2031s as the best risk adjusted way to stay exposed.

The 2031s offer the best balance of coupon, amended maturity, potential PIK claim accretion and recent trading support. We view the bonds as the preferred curve expression for accounts that want exposure to a negotiated recuperação extrajudicial. The 2034s remain acceptable secondary belly exposure, but we prefer the 2031s because the shorter maturity provides better protection if the restructuring is implemented through a maturity extension rather than a common recovery instrument. The 2028s offer the highest screen yield, but that yield is less meaningful if the maturity is extended. The 2050s offer low dollar price optionality, but under the current proposal they remain very long dated, lower coupon paper. The long end becomes more interesting only if final terms collapse maturities into a common senior unsecured recovery package, which is not the current proposal.

The proposal is more supportive of the higher coupon belly than of the front end or the long end. Braskem is proposing a uniform amendment, not an exchange into a single common takeback instrument: a five-year extension, PIK option through December 2028 and a 200 bps coupon reduction, while preserving principal and unsecured status. That keeps each bond’s original coupon and maturity profile relevant. After the proposed coupon cut, the 2031s would still accrue at roughly 6.50%, versus 2.50% for the 2028s and 2030s and 3.875% for the 2050s. If coupons are PIKed, the higher coupon bonds build a larger accreted claim, while the five-year extension erodes the 2028s’ maturity advantage and leaves the 2050s as very long dated, lower coupon paper.

Read more

We take a fresh look at Telecom Argentina (B2/B-/B-) following the June 18 antitrust ruling on its acquisition of Telefónica Móviles Argentina (TMA), and assign a Neutral recommendation to the issuer. Within the curve, we prefer the TECOAR 8.500% 2036 notes for investors who want to maintain exposure. The conditional approval cuts both ways. It removes the risk of outright rejection and gives Telecom a clearer path to integration, but the conditions are heavier than the market expected and reduce the scale benefits the acquisition was meant to deliver.

For bondholders, the question is no longer whether the deal can proceed, but how much value Telecom retains after divesting 6 million mobile customers, transferring spectrum, selling fixed internet subscribers in selected localities and giving a new competitor access to its network. On that question, we land at Neutral. The EBITDA tied to the required divestitures appears manageable relative to the group, leverage remains low, and the rating is still constrained more by the sovereign than by the business perimeter. That helps explain why the credit did not reprice the news as a material negative, even as the equity sold off about 12% from the eve of the ruling and roughly 20% from its early June high.

What the ruling does add is another layer of execution risk around EBITDA retention, integration timing, competitive pressure from a regulator enabled competitor and management’s capital allocation priorities. At current spreads, we do not think the bonds pay investors enough to add to that risk. Our Neutral call is therefore driven mainly by valuation. Telecom OAS compressed by roughly 50 bps in the weeks before the ruling and is now close to one year tights, leaving limited spread cushion for incremental risk after the remedy decision. We would not add the 2031s or 2033s at current levels. For investors who need exposure, we prefer the 2036s, but as a Hold rather than a Buy.

What happened

On June 18, 2026, Argentina’s antitrust tribunal, TDC, within the ANC, cleared Telecom’s acquisition of exclusive control of TMA, owner of the Movistar brand, subject to structural and behavioral remedies. Telecom acquired 100% of TMA for US$1.245bn, with the transaction finalized on February 24, 2025, but the deal had been under preventive suspension since March 2025. The regulator’s concern was concentration. Combined, Telecom, through Personal, with a 33.8% share, and Movistar, with a 24.4% share, would have held roughly 58% of the mobile market, compared with AMX, through Claro, at 42%. This would have created a duopoly in mobile and close to 70% concentration across total telecom services. The remedies are intended to bring the combined position back toward 50%.

The principal disclosed terms and reported implementation details include:

• Mobile divestiture of at least 6 million customers, including 4 million in AMBA and 2 million in the rest of the country, to an independent buyer. This represents roughly a third of TMA’s 19.2 million mobile accesses and about 9% of the national mobile market.

• Transfer of the radio spectrum usage rights needed for the divested mobile service to operate competitively. Press reports also indicate a broader spectrum remedy of 130 MHz, including 60 MHz returned immediately nationwide and the remainder routed to the secondary market.

• Network access for the new entrant, including RAN sharing, national and international roaming, and colocation, for a transition period reported at two to three years, until the new operator builds out its own network.

• Transfer of Movistar’s residential fixed internet base in 28 localities, totaling 211,400 subscribers, across CABA, Buenos Aires, Mendoza, Neuquén and Río Negro, plus behavioral remedies in the corporate and wholesale segments.

• A divestiture window of up to 18 months, supervised by an independent monitoring agent.

Telecom called the ruling excessive and said it is weighing its options as a listed company with financial implications, without ruling out any alternative. The company also reiterated its investment commitment, at roughly US$1.3bn this year and about US$9bn since 2018. The ruling resolves the binary risk but leaves Telecom with a choice: comply, negotiate, challenge the decision or seek modifications. Its initial response points away from quiet acceptance.

For bondholders, that creates a two way path. A legal or regulatory dispute would delay integration, while full compliance would lock in the loss of scale and EBITDA. Either way, the deal is no longer at risk of outright rejection, which is the part that mattered most for the credit.

Read more

We initiate coverage of Argentina sovereigns with a Neutral recommendation on USD denominated bonds and identify the ARGENT 2035s and 2041s as our preferred curve expressions. Argentina remains a normalization trade, not yet a normalized credit. Fiscal consolidation, disinflation, rating momentum and improved market confidence support the recovery, while substantial carry argues against a defensive underweight stance. Much of the post stabilization convergence is already priced, however, and low net FX reserves, an incomplete current account adjustment and rising 2027 political risk argue against a broad Overweight recommendation at current levels.

Within the curve, we favor the 2035s and 2041s. The 2035s offer the cleanest OAS entry point, while the 2041s provide greater spread compression upside if Argentina continues moving toward market access pricing. We do not emphasize the 2038s because they trade inside the 2035s on OAS and below the 2041s on yield, while offering less upside to further spread compression than the 2041s. They are less differentiated within the preferred belly segment. For defensive exposure, we would favor ARGENT 2030 over ARGENT 2029, as the 2030s still offer modestly better yield and OAS while keeping policy horizon risk relatively contained. We would size the 2046s as a smaller, higher beta normalization position rather than the core expression. We would use political volatility as a source of entry points, not only as a source of risk, to add to the 2035s and 2041s.

The sovereign is no longer trading only on crisis avoidance. Investors are now pricing rating migration, lower country risk and eventual market access. Macro data, rating actions and the curve all point to that shift.

Read more

Cemex priced US$1.5 billion of 5.750% Senior Notes due June 5, 2036. The notes have a June 5, 2026 issue date, mature on June 5, 2036, and pay interest semiannually. They were priced at 99.572 to yield 5.807%, with an issue spread of 135 bps over the UST 4.375% due May 15, 2036. The notes are senior unsecured obligations guaranteed by Cemex Corp. and are rated BBB- by S&P and Fitch. They are callable at par on March 5, 2036. Cemex intends to use the proceeds for general corporate purposes, which may include the repayment of indebtedness and other financial obligations, including all or part of outstanding borrowings under certain credit agreements.

We maintain our Neutral issuer level view on Cemex and assign a Buy recommendation to the new 2036 notes. The issuer call reflects a restored investment grade profile that is already well reflected in spreads, while the bond call reflects what we view as the cleanest 10Y entry point on the Cemex curve. We view the Buy recommendation as driven by carry, benchmark liquidity and curve access, rather than by a clear new issue discount. The 2036s did not price with an obvious spread concession, but they offer a near par entry point, 5.8% YTW, full benchmark size and a more efficient longer dated expression than the existing 2029, 2030 and 2031 notes.

Read more

We move Simpar to Neutral at the issuer level, while expressing our constructive view through an Overweight recommendation on the MOVIBZ 5.250% 2031 notes as the preferred total-return and relative-value opportunity within the bond curve. The credit story is improving directionally, but after the recent spread compression, the 1Q26 results were not clean enough to support a broad Overweight recommendation across the group at current bond levels. Leverage remains elevated, interest coverage remains thin against Brazil’s high interest rate backdrop, and reported net free cash flow remained negative in 1Q26 after working capital. The lower-capex and value-extraction phase is becoming more visible, but the deleveraging thesis still needs cleaner evidence of recurring free cash flow after interest and working capital, with less reliance on temporary working capital swings, asset monetization, capital increases, or continued refinancing access.

The recommendation is therefore less about a broad re-rating call and more about where the next leg of risk-adjusted upside remains. Simpar’s operating direction supports staying involved in the credit, but the first stage of spread compression across parts of the curve has largely played out. VAMOBZ 2031 remains the most carry-efficient bond in the 2031 area, but at 588 bps it now trades close to its 1Y Z-spread minimum of 583 bps. By contrast, MOVIBZ 2031 offers the cleaner total-return setup, as it combines a deep discount price, operating-company recourse, and a current 529 bps Z-spread.

Read more

We move our recommendation on Telecom Argentina (B2/B-/B-) from Overweight to Neutral, while retaining the TECOAR 8.500% 2036 notes as our preferred expression within the curve for investors seeking to maintain exposure. The change is driven by valuation rather than a reversal in our fundamental view of the credit. Telecom remains an improving B rated Argentine credit, supported by TMA margin convergence, lower leverage, positive free cash flow, and a stronger maturity profile after the January refinancing. However, the front of the curve has rallied to levels that leave limited room for additional spread compression, given weak liquidity, unresolved regulatory risk around the TMA acquisition, and the dividend authorization in place through the end of 2026.

The 1Q26 results support the credit, but they do not justify keeping a broad issuer level Overweight after the move tighter. The key improvement was the quality of profitability across the enlarged platform, especially at TMA, where margin convergence progressed faster than we previously expected. That matters because the investment case after the acquisition depends less on near term revenue synergies, which remain constrained by the regulatory process, and more on cost discipline, efficiency gains, and the ability to narrow the profitability gap between the two platforms. The quarter also reinforced that the January refinancing was not just a technical event. Telecom’s maturity profile is now more manageable, and near-term refinancing pressure has declined.

These positives would normally support a more constructive credit call, but in our view, they are already largely reflected in the front of the curve. The TECOAR 9.500% 2031 notes trade at $107.3, with 3.4 years of duration, 343 bps Z-spread, and 7.3% YTW. At 343 bps, the 2031s screen near one-year tights and well inside the 3M and 1Y averages of 406 bps and 483 bps, respectively. The TECOAR 9.250% 2033 notes trade at $106.2, with 3.1 years of duration, 362 bps Z-spread, and 7.4% YTW. The current Z-spread is also near the tight end of its one-year range and well inside the 3M and 1Y averages of 422 bps and 504 bps, respectively. On a yield basis, the 2031s and 2033s yield meaningfully below the EM B Index YTW of 8.7%.

Read more

We maintain our Neutral recommendation on MercadoLibre. We continue to view MELI as one of the highest-quality BBB credits in LatAm, supported by structural leadership in e-commerce and fintech, strong ecosystem dynamics, scale advantages, and robust operating cash generation. However, 1Q26 reinforced the same credit trade-off that shaped our 4Q25 view. Growth remains exceptional, but management continues to prioritize ecosystem expansion, credit growth, free shipping, fulfillment, 1P, cross-border trade, AI, and credit card scaling over near-term margin recovery. We view this strategy as supportive of long-term franchise value, but it keeps profitability under pressure, sustains a structurally larger balance sheet, and limits the case for a more constructive bond recommendation at current spreads.

From a credit perspective, the quarter does not change our view of MELI as a strong investment-grade issuer, but it reinforces why we remain Neutral. The company continues to generate substantial operating cash flow, but adjusted free cash flow remains sensitive to the pace of Mercado Pago credit growth. Leverage moved higher, liquidity coverage tightened, and margin recovery is likely to remain gradual as management keeps investing behind ecosystem growth. We do not view these trends as a material credit concern given MELI’s scale, cash generation, and market access, but they temper the case for adding exposure despite the modest spread give-back and better all-in yield.

Read more

We maintain our Opportunistic Overweight recommendation on CSN, with a preference for the CSN 4.625% 2031s as the more balanced expression and the CSN 5.875% 2032s as the higher upside expression within our preferred part of the curve. We continue to use the Opportunistic Overweight label deliberately, as the thesis remains driven by valuation dislocation, distressed dollar prices, and potential upside from deleveraging execution rather than by a clean improvement in the underlying credit trajectory. The recent downgrade cycle remains central to the spread dislocation, but we think the market is now pricing CSN closer to a distressed recovery trade than a conventional single B credit.

1Q26 results were not strong enough to remove the core concerns around leverage, free cash flow, secured debt, and execution risk, but they also did not point to a near term liquidity event. Revenues declined 7.0% QoQ and 2.8% YoY to R$10.60 billion, while adjusted EBITDA declined 12.1% QoQ on our normalized basis but increased 5.5% YoY to R$2.65 billion. Operating performance was mixed, with weaker sequential EBITDA mainly reflecting mining seasonality, heavier rainfall, and logistics pressure, while cement delivered record EBITDA and steel showed signs of improvement in March and April. Credit metrics improved sequentially, with gross leverage declining to 4.74x from 4.98x and net leverage improving to 3.49x from 3.59x. However, leverage remains materially higher when customer prepayments are included, with gross leverage at 5.98x and net leverage at 4.72x, reinforcing that the balance sheet remains stretched despite the sequential improvement. Cash generation also remained weak, as adjusted EBITDA covered capex and interest, but working capital and other below the line items pushed net free cash flow to a R$1.04 billion outflow. In our view, the quarter keeps the thesis tied to execution, with deleveraging still dependent on stronger cash conversion, inventory reduction, refinancing execution, and asset sale proceeds.

Liquidity remains adequate at the consolidated level, but the headline cash balance deserves caution from a bondholder perspective. CSN’s reported cash of R$14.62 billion covered short term debt by 1.6x as of March 2026, while the standalone parent balance sheet showed a materially tighter position. Parent level cash and short term investments totaled R$2.21 billion against R$4.96 billion of standalone short term borrowings and R$12 million of lease liabilities, leaving a funding gap of roughly R$2.76 billion before refinancing, intercompany flows, asset sales, or new funding sources. We think this distinction matters because the parent company carries the key refinancing burden, including near term bank maturities, financial expenses, capex needs, and the 2028 bond maturity.

The US$1.2 billion bridge loan signed in April, with potential expansion to US$1.4 billion, materially improves near term funding visibility. Including the bridge loan proceeds, pro forma liquidity would increase to approximately R$20.88 billion, short term debt would represent 44.5% of pro forma liquidity, and pro forma liquidity would cover short term debt by 2.2x. We would still not characterize liquidity as strong, given negative free cash flow and the much tighter standalone parent position, but the bridge loan reduces near term refinancing pressure and gives CSN additional time to execute its deleveraging plan.

Read more

We maintain our Neutral recommendation on Braskem. 1Q26 results improved sequentially at the EBITDA level, but not enough to change the credit debate. Braskem remains a capital structure and liquidity story rather than a clean cyclical recovery story, with very high leverage, negative FFO, weak cash generation, limited working capital flexibility, and the drawn US$1.0 billion standby facility due in December 2026 still central to the refinancing discussion. We think REIQ support, the recent improvement in petrochemical spreads, and the ongoing governance reset provide important optionality, but they do not yet solve the balance sheet problem.

The main change since our 4Q25 downgrade is valuation. Braskem’s senior unsecured bonds have rallied materially from distressed levels, with the BRKME 4.500% 2028s now at $66.9, up from $46.9 at the time of our 4Q25 report, the BRKME 4.500% 2030s at $60.9 versus $46.4, the BRKME 8.500% 2031s at $62.1 versus $44.9, and the BRKME 5.875% 2050s at $48.3 versus $38.5. The move reflects lower perceived immediate default risk, policy support, better short-term spread expectations, and progress on the ownership and governance framework. However, the underlying credit risks remain largely unresolved. In our view, the rally has reduced the margin of safety before Braskem has delivered a credible out-of-court solution, restored working capital access, or addressed the December 2026 standby maturity. That keeps us from turning more constructive, even with yields still elevated across the curve.

We also recognize that the operating backdrop has become less negative since the 4Q25 report. Petrochemical spreads have improved, and management indicated that stronger pricing was already visible in April. Management also noted that current spread levels could support high-cycle EBITDA potential, using 1Q17 as a reference point, when quarterly EBITDA exceeded US$1.0 billion under similar spread conditions. This is an important reference, but not a normalized earnings target. Braskem also emphasized that liquidity, working capital, feedstock access, and utilization remain the binding constraints on translating stronger spreads into cash generation. We therefore view the better spread environment as a meaningful source of optionality, but not yet as confirmation of a durable credit turn.

Read more

We maintain our Overweight recommendation on JBS, although the trade has become more selective following weaker 1Q26 results and the spread compression observed across the curve since 4Q25. The quarter was clearly softer, with adjusted EBITDA down 33.9% QoQ and 25.8% YoY, free operating cash flow turning to a $1.47 billion outflow, and our adjusted gross and net leverage increasing to 3.62x and 3.11x, respectively. We do not think 1Q26 breaks the broader credit thesis, as JBS remains supported by the scale and diversification of its global protein platform, strong liquidity, continued capital markets access, a manageable maturity profile, and management’s commitment to operate within its 2.0x to 3.0x company-defined net leverage target.

However, the quarter matters for bondholders because JBS used balance sheet capacity to absorb negative free cash flow while also carrying a declared $1.07 billion dividend payable in June. This leaves less room for near-term deleveraging and raises the importance of stronger cash generation over the remainder of 2026. We view refinancing activity as manageable given the company’s liquidity and market access, but paying dividends against a backdrop of negative free cash flow is less supportive from a creditor standpoint. We considered whether the weaker quarter, tighter free cash flow outlook, and leverage above 3.0x on our adjusted metrics justified moving to Neutral. Still, we think the remaining long-end spread pickup compensates investors for the deterioration in cash generation, provided management remains disciplined on shareholder distributions and M&A while free cash flow remains weak.

North America Beef remains the main operating overhang into 2026, while Brazil, Australia, Seara, and U.S. Pork continue to provide important offsets within a still uneven protein cycle. As a result, weaker cash generation and the upcoming June dividend make bond selection more important than it was at 4Q25.

Read more

We maintain our Overweight recommendation on YPF (B2/B-/CCC+), as 1Q26 further supports our view that the company’s transition toward a lower-cost, oil-weighted, and more shale-centered asset base is improving credit resilience. Operating performance was strong, with adjusted EBITDA supported by stronger pricing, higher shale production, lower lifting costs, and better refinery processing levels. Shale oil production reached 205 kbbl/d, representing nearly 76% of total crude output, while total lifting costs declined to $8.8/boe. Credit metrics also improved, with gross leverage declining to 2.01x, net leverage falling to 1.69x, and interest coverage increasing to 4.86x. We think the quarter reinforces the underlying credit trajectory and supports a continued Overweight stance.

However, valuation now requires more discipline. YPF bonds have tightened meaningfully since our 4Q25 report, with compression especially sharp in the 8.250% 2034 notes. The Z-spread on the 2034s has tightened 94 bps to 333 bps from 427 bps at 4Q25, compared with a 70 bps move in the 2033s, a 59 bps move in the 9.500% 2031s, and a 53 bps move in the 2047s. The 2034s also no longer offer the same relative spread concession versus the 2033s. The Z-spread pickup has narrowed to about 22 bps from roughly 46 bps at 4Q25, reducing the relative value cushion that previously made the 2034s stand out more clearly. Still, this does not eliminate their appeal given their higher carry, wider current Z-spread, and lower duration. The strong performance leaves less room for another broad leg of spread compression, particularly with YPF already trading materially inside Argentina sovereign risk. The Z-spread differential between Argentina 2038s and YPF 2033s is now about 269 bps, compared with roughly 363 bps based on the 1-year average relationship, suggesting that a meaningful portion of the credit decoupling is already reflected in prices.

Read more

We maintain our Neutral recommendation on Minerva, but with a more constructive valuation tone following the recent widening in the BEEFBZ 4.375% 2031 notes. Our 4Q25 downgrade was anchored on the view that the re-rating had largely played out, with the bonds trading close to or inside relevant EM BB benchmarks and offering limited asymmetry after a strong period of spread compression. Current levels have changed that picture. The 2031s have widened back to a meaningful spread premium versus the EM BB index while retaining a clean below-par structure, providing a more reasonable entry point. At the same time, we do not think the move is enough to restore an Overweight stance, as 1Q26 results still point to a balanced rather than improving operating setup. Revenue and EBITDA remain supported by scale, pricing, geographic diversification, and acquisition integration, but cattle cost inflation continues to pressure margins and free cash flow conversion, while cash interest coverage remains the key constraint to a more constructive credit view.

Minerva’s credit story remains intact. The company delivered 16.2% YoY EBITDA growth in 1Q26, reduced gross debt by 11.4% QoQ through active liability management, and maintained R$10.88 billion in liquidity, covering short-term maturities by 3.1x. Capital allocation continues to balance deleveraging with a more visible shareholder return framework, while the diversified export platform across Brazil, Argentina, Colombia, Uruguay, Paraguay, and Australia provides flexibility across origins and end markets.

However, the operating backdrop is not without pressure. Management expects 2026 margins to remain below 2025 levels on higher cattle costs across key origins, gross margin contracted YoY in 1Q26, net free cash flow was negative at R$811 million, net leverage increased modestly to 2.77x, and cash interest coverage of 1.93x remains below the 2.0x level we view as necessary for a more constructive stance. We note that cash financial expenses declined YoY in 1Q26, supported by active liability management. The new 7.500% 2036 notes are expected to target the rollover of short-term debt, which should eliminate 2026 refinancing risk and improve Minerva’s maturity profile and refinancing flexibility. While the coupon is meaningful, the net impact on cash interest will depend on the cost and amount of debt ultimately repaid. Sustained EBITDA growth and stronger free cash flow conversion after working capital therefore remain central to further improvement in interest coverage and credit metrics.

Read more

We maintain our Neutral recommendation on Suzano. We continue to view Suzano as a high-quality BBB- LatAm credit, supported by global cost leadership in hardwood pulp, strong liquidity, a diversified revenue base, and disciplined financial policy. Valuation, however, remains the main constraint after the recent tightening. 1Q26 results were weaker on a headline basis, but the decline was driven mostly by normal first-quarter seasonality, lower shipments, BRL appreciation, and scheduled maintenance downtime rather than any deterioration in Suzano’s competitive position. Pulp pricing improved sequentially, cash costs remained structurally competitive, and liquidity remains strong, but leverage is still elevated and the credit remains exposed to pulp-cycle volatility and FX translation pressure.

The quarter reinforced the balance of the credit story. Suzano continues to benefit from scale, cost competitiveness, strong liquidity access, and a more supportive pulp pricing backdrop, while lower 2026 capex should help free cash flow recover as seasonal headwinds normalize. Potential non-core asset sales could provide an additional deleveraging lever, although we continue to view operating cash flow as the central driver of balance sheet improvement. At the same time, 1Q26 showed that higher USD pulp prices can still be diluted in reported BRL EBITDA by a stronger BRL, seasonal volume weakness, and scheduled maintenance effects. Gross leverage improved to 4.5x from 4.7x in December 2025, while net leverage remained broadly stable at 3.5x. That leaves the balance sheet supportive of the credit, but not yet strong enough to justify an Overweight recommendation. We therefore see free cash flow generation and gradual deleveraging as the key variables for any more durable re-rating.

Read more

We maintain our Overweight recommendation on PEMEX, while becoming more selective across the curve after the strong policy-driven rally. The 1Q26 results reinforce our core view that PEMEX remains a government-backed credit, with bondholder performance driven more by policy support, liability management, and market access than by a self-sustaining recovery in standalone cash generation. Adjusted EBITDA recovered sharply, debt declined again, and government-related inflows through equity contributions, the FONADIN subvention, and collections from the Mexican government more than covered the company’s pre-contribution cash deficit. The stronger oil and refined product price environment provided an incremental tailwind, although in our view this layered onto rather than reshaped the credit story. For bondholders, we think 1Q26 again showed the depth of government commitment behind the credit.

At the same time, 1Q26 does not remove the structural weakness in PEMEX’s operating model. Adjusted EBITDA recovered to $6.71 billion from a very weak 4Q25 base, but the YoY comparison was less clean in local-currency terms, with EBITDA declining in MXN and consolidated revenues also lower in MXN. Cash generation improved at the headline free cash flow level, but pre-contribution net free cash flow remained negative after working capital, taxes, lease payments, and other cash uses. We would also be careful about extrapolating the lower 1Q26 capex run rate, as investment spending is likely to accelerate through the rest of the year. Liquidity has improved, supported by lower short-term debt, a cash balance that remains above recent historical levels, and meaningful revolver availability. However, the standalone position is not yet comfortable, as short-term debt still represents a high share of total liquidity. We therefore view the quarter as evidence of better liquidity visibility, supported by government backing and market access, rather than a durable improvement in standalone cash generation capacity.

The 2026 setup is more balanced, but also more valuation-sensitive. PEMEX has made visible progress in reducing debt, extending funding visibility, improving bank financing terms, and reentering the local capital markets. The renewal and expected improvement of revolving credit facilities should support liquidity flexibility, while management’s focus on debt-neutral issuance and liability management reduces near-term refinancing pressure. A debt-neutral USD transaction combined with tenders or buybacks would be credit positive, as it would reinforce market access and help smooth the maturity profile, but we would not use that optionality to favor any single short-dated bond at current levels. The cooperation agreement with Petrobras is also directionally positive, particularly as a potential source of technical expertise, operating discipline, and project execution support. However, we would not treat it as a near-term credit catalyst, given the absence of disclosed project economics, investment commitments, implementation timelines, or expected financial contribution.

Read more

We maintain our Overweight recommendation on Vista Energy, but update our curve preference following the rally in the VISTAA 8.500% 2033 notes and the issuance of the new VISTAA 7.875% 2038 notes. After the recent spread compression, this is no longer a broad tightening call. The trade is now more about carry, curve selection, and choosing the right point of exposure. The 2033s remain a high-quality defensive hold for investors prioritizing lower duration and lower volatility. For new money, we prefer the VISTAA 7.625% 2035 notes as the more balanced expression. The newly issued 2038s also look attractive for accounts willing to add modest duration in exchange for the highest carry on the Vista curve.

Vista’s 1Q26 results continue to support the fundamental credit thesis. The quarter was marked by strong YoY production growth, resilient EBITDA generation, and a constructive guidance update. Management raised 2026 production guidance to 143 kboe/d from 140 kboe/d and left Capex unchanged at $1.5 billion to $1.6 billion. Under the $85/bbl Brent base case, Vista now expects $2.6 billion of adjusted EBITDA and $0.7 billion of free cash flow before the Equinor Transaction. Pro forma adjusted EBITDA is expected to increase to $3.0 billion after closing. This should support deleveraging, particularly as management has been clear that the next phase is about converting the enlarged production base into free cash flow and reducing net leverage toward approximately 1.0x by year-end 2026.

The key offset in 1Q26 was liquidity. Liquidity moved backward from the stronger year-end 2025 position, as cash and short-term investments no longer covered short-term debt at the end of March. The deterioration reflected an investment-heavy quarter, including VEISA-related working capital needs and acquisition funding. The subsequent $500 million 2038 senior notes issuance materially improved that snapshot and confirmed Vista’s continued access to international capital markets. Still, the lack of committed USD revolving credit facilities remains a constraint, and Al Mehwar’s reduced ownership limits the likelihood of external shareholder support in a stress scenario. Even with that caveat, Vista’s operating momentum, larger production base, and improved free cash flow outlook keep the Overweight case intact.

Read more

We maintain our Neutral recommendation on Gerdau’s bonds. We continue to view the company as one of the cleaner BBB LatAm industrial credits, supported by conservative leverage, strong liquidity, and a structurally advantaged North American business. 1Q26 reinforced that view, with adjusted EBITDA increasing 23.2% YoY to R$2.96 billion, gross leverage improving to 1.45x, and FFO to total debt increasing to 53.3%. However, the curve already reflects much of this credit quality. At current levels, Gerdau’s belly screens rich versus the EM BBB curve, while the long end appears closer to fair value. This keeps us Neutral rather than more constructive, as the stronger credit profile is already largely reflected in spreads.

The key point for bondholders is that Gerdau’s credit story remains solid, but the valuation case for adding risk is limited. The GGBRBZ 5.750% 2035 notes trade around 103 bps OAS, priced at $102.6, with 6.9 years of duration and a 5.4% YTW. We view the 2035s as the best holding point on the curve because they offer the cleanest balance between carry, duration, liquidity, and credit quality, while providing direct exposure to Gerdau’s resilient North American earnings base. However, we do not view the notes as a compelling add at current levels. The notes trade visibly through the EM BBB curve at their duration, and the spread differential versus the EM BBB index is now close to flat compared with a one year average premium of around 17 bps. In our view, this reinforces the conclusion that valuation already captures much of Gerdau’s credit strength. We would become more constructive closer to 120 bps OAS, which would place the 2035s back near the EM BBB curve and represent a more defensible entry point for a Brazil corporate credit, even one with Gerdau’s stronger balance sheet and differentiated U.S. exposure.

Read more

We maintain our Neutral recommendation on Cemex. While 1Q26 results reinforce the constructive credit trajectory we have flagged in prior reports, with operating momentum, margin expansion, and improving underlying cash generation supporting the path toward management’s leverage targets, valuation remains the binding constraint on our stance. Cemex bonds have compressed further across the curve and now trade inside their respective 3 month and 1 year averages, leaving limited room for additional tightening absent a clearer catalyst. In this context, we think the credit remains a high quality hold rather than a fresh Overweight opportunity, with curve selection becoming more important as spreads approach tighter levels. We view the 2029s as the defensive hold and the 2031s as the preferred risk adjusted bond for investors willing to add moderate duration.

From a fundamental standpoint, we view the credit profile as resilient and on a constructive trajectory, supported by structural margin gains under Project Cutting Edge, pricing discipline, and Mexico’s volume recovery. Fitch’s outlook revision to positive from stable on the BBB- rating during the quarter reinforces the rating upgrade path, with management guiding net leverage to converge toward the 1.5x BBB threshold by year end and potential agency action as early as 1H27. Mexico specific risks, trade uncertainty between the U.S. and Mexico, and broader geopolitical volatility remain potential sources of weakness, particularly in a risk off environment.

In our view, neither an Overweight nor an Underweight stance is appropriate at current levels. We do not see a strong enough catalyst for an Overweight, as the path toward a formal upgrade to BBB flat remains more likely skewed to 1H27 and the bonds already reflect much of the improvement. The 2031s trade at 129 bps OAS, broadly in line with the EM Corporate BBB Index at 132 bps OAS and inside their 1 year average, while the 2030s trade 26 bps tight to the EM Corporate BBB Index. At the same time, we do not view an Underweight as warranted given the absence of fundamental deterioration, the supportive rating trajectory, and the company’s improving free cash flow capacity. In our view, the credit story remains intact, but valuation already reflects the improving trajectory, leaving the risk reward more balanced than directional.

Read more

We maintain our preference for the VAMOBZ 9.200% 2031 notes as the primary expression of a constructive view on the credit. Since January 6, SIMHBZ 2031 has compressed by roughly 148 bps to 498 bps, while VAMOBZ 2031 has drifted modestly wider to 649 bps, creating a 151 bps spread gap versus the essentially flat relationship that existed at initiation and a 160 bps yield gap in VAMOBZ’s favor. VAMOBZ also retains a shorter duration at 3.5 years versus 4.0 years for SIMHBZ. In our view, this combination of higher carry, lower duration, and operating-company positioning continues to make VAMOBZ the most attractive way to express the improving Simpar credit story for investors focused on defensive carry and downside protection. MOVIBZ 2029 remains the middle ground for investors focused on shorter duration and liquidity.

The 4Q25 results validate the directional thesis we outlined at initiation. Operating performance improved meaningfully, leverage continued to decline, and capital intensity reached its lowest level in five years, supporting the view that the group has entered a lower-investment and potentially more cash-generative phase. That said, underlying free cash flow remains dependent on working capital support and asset monetization rather than recurring operations alone, while Brazil’s elevated interest rate environment continues to constrain deleveraging by absorbing a large share of EBITDA and keeping EBITDA interest coverage thin. Liquidity is adequate, capital markets access has remained open at improving cost levels, and management has framed 2026 as a value-extraction and efficiency phase, with cash generation expected to become more resilient as investment needs normalize.

Within the group, cash conversion trends also reinforce our preference for Vamos. The comparison is directional rather than fully comparable, but it remains informative. In 4Q25, Vamos generated EBITDA equal to 3.8x net capex, versus only 0.6x at Movida, highlighting that Vamos is already operating in a much clearer lower-investment and higher-cash-conversion phase, while Movida remains materially more capital intensive. Simpar sits in between at the consolidated level, but the ratio is closer to 1.1x when using adjusted EBITDA rather than reported EBITDA, which benefited from the Ciclus Rio divestment. We think this reinforces the view that the strongest internal cash-generation profile in the complex currently sits at Vamos.

Read more

We downgrade Braskem to Neutral from Overweight. The recent report that the company is considering seeking local court protection against creditors, even if no final decision has been made and plans may still change, materially alters the risk profile and, in our view, is difficult to reconcile with an Overweight stance. This comes on top of an already very weak 4Q25 backdrop, with results remaining below expectations, liquidity deteriorating sharply, leverage increasing further, and management framing 2026 around liquidity preservation and capital structure reorganization rather than recovery. Braskem’s own disclosure that its results indicate a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern further reinforces this shift in the credit narrative. In that context, we no longer think it is appropriate to recommend adding risk until there is greater clarity on whether Braskem can secure a credible out of court solution or will need to pursue a more formal restructuring path.

Read more